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News Jun 2, 2020 06:17 pm EqualOcean

Fosun Pharma Proformes Well in Anti-Tumor Sector and Plans to Board on Chinese STAR Market

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Jun 3, 2020 11:36 pm · official site of NMPA

BeiGene's New Drug Zebutinib Approved for Market in China

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May 22, 2020 10:52 pm ·

Jiangsu Hengrui, Chinese Cancer Drugmaker Emerging from the Shadows

► Jiangsu Hengrui has shown a very positive future growth driven by heavy investment in R&D along with stains – several cases of corruption scandals in the history. ► As China's healthcare reform, more pharmaceutical companies are being monitored in the public. Looking at the oncology pharmaceutical market in China, Jiangsu Hengrui (600276:SH) has been deemed one of the flagships of recent years – unexpectedly, as the story is one of an outlier that somehow witnessed the whole history of the domestic pharmaceutical industry. Founded as a traditional medicine factory in 1970, it advanced to become a high-tech firm in 1999, listed on the Shanghai Stock Exchange market in 2000, was approved for sale in the US in 2011 and was granted the European CE mark in 2012, etc. During the last decade, this healthcare giant has evolved to become a medicinal innovator from being only a generic drug manufacturer. In a brief overview of its product portfolio – Hengrui Medicine has covered oncology drugs, narcotics, contrast agents, cardiovascular medicines, injections and antibiotics with prominent popularity in the first three aforementioned products.  As this high-tech-driven global pharmaceutical brand boasted of its 2019 performance, with an over 30% increase in both gross margin and net margin, it soon came out that a corruption scandal was brewing, just one month after its disclosure of its annual report in April. Here is a case of the ‘shadow in the sun.’ Although it is not uncommon to be 'surprised' by the many corruption incidents in healthcare businesses, it is still an 'intolerable' fact. It cannot help but leave the market wondering whether the next big deal will be more real or more fake? An artificial light bulb or natural sunshine? Monetizing innovation power? R&D is undoubtedly the value driver, but how efficient is it? For an innovative medicine provider, research and development is one major growth engine. The year of 2019 saw an R&D investment of CNY 3.9 billion, as much as 16.7% of the revenue. It claims that it has devoted around 15% of revenue to developing new drugs in recent years – a ratio that just hit the required R&D threshold of Chinese Star Market-listed companies.  Powered by a research team of over 3,400 people, including over 2,000 with advanced degrees above post-graduate level, this giant has a wide range of on-going pipelines covering oncological auxiliary treatments, immune system and respiratory system-related problems and other chronic diseases, such as diabetes. In 2009, six products in the pipes obtained periodic breakthroughs; among them there were two most noteworthy improvements. The first was the approval for remazolam toluene sulfonate for injection ('注射用甲苯磺酸瑞马唑仑') to go to the market. As a safer, more effective narcotic alternative, this is expected to be applied to routine gastroscopy. This treatment for fiber bronchoscopy sedation has just been approved to enter its Phase III clinic trial on May 15. The other breakthrough is the launch of camrelizumab ('注射用卡瑞利珠单抗'), a kind of PD-1 monoclonal antibody, approved in May 2019. However, it is a heated-competed arena. On a global scale, there are seven pharmaceuticals approved to sell these antibodies, including four Chinese companies – Jiangsu Hengrui, Shanghai Junshi Biosciences (1877:HKSE), Innovent Biologics (1801:HKSE) and BeiGene (6061:HKSE). However, this business progression is not as sexy as it looks. In a look at the 2019 market, the global sales revenue of this PD-1 antibody was USD 18.9 billion. Hengrui has been a little behind, since it is not only a late entrant, but also provides more expensive products, without healthcare insurance incentives to patients. Hengrui's PD-1 antibody is the most expensive, at a unit priced at four times from Innovent Biologics at the same amount(milligram). To take a share out of the tripolar-dominated market size, it introduced a more aggressive selling strategy. No player wants to lose its portion of the market pie by being stingy. A direct result of the discount price war is that all end up giving away a lot of profits. In an estimation about their post-discount revenues, Jiangsu Hengrui sent out 19.8 units, followed by Innovent Biologics at 14.2 units and Junshi Biosciences at 12.5 units (calculated by ex-ante expected unites minus ex-post units). As of March 2020, Hengrui has invested over CNY 893.4 million in developing this product.  An international medical giant, Hengrui never lacks in Plan Bs. Late in the first quarter this year, Hengrui announced that it plans to yield its patent and related legal use rights (exclusive clinical development, registration and sales in the market) to CrystalGenomics (083790:KOSDAQ), a Korean public biotechnology company, for a decade. This license-out will guarantee Hengrui a USD 1.5 million front-pay, R&D and market launch milestone pays totaled at up to USD 2 million, and sales milestone pays of up to USD 84.25 million and 10-12% from net revenue since the commercial stage. Hard to do a ‘clean’ job – but it has to be done However, no matter how flashing and eye-catching its business tricks and financial performance look, it has acquired noticeable stains – like many other pharmaceuticals. This May saw a breakout scandal about sales corruption in Hengrui Medicine. The pharmaceutical company bribed the head of the anesthesia department at Lishui ('丽水') Civic Central Hospital in Zhejiang province with dirty money to the tune of CNY 2.77 million. Sadly, not a rare moment in the Chinese pharmaceutical industry. Likewise tarnished have been other big-name drug providers had commercial briberies, such as Fosun Pharmaceutical (600196:SH) and Buchang Pharmaceutical (603858:SH), etc.  This commercial bribery problem has been a historical issue, with a root in 'Gold Sales' ('带金销售') – a kind of sale to provide kickbacks to doctors with prescription rights. In the past, the pharmaceutical business was generally sales-oriented, so companies wasted a lot of money on selling expenses instead of investing in innovation. Although this gray area has been known about for years, it has not been eradicated. Now China has escalated healthcare reform to the anti-corruption stage, by introducing a national policy, Centralized Purchasing of Drugs for Public Hospitals ('带量采购'). It is still too early to judge how much it can clean the healthcare industry – several healthcare companies are being cleaned out of the medicine distribution business, such as Yunnan Baiyao (000538:SZ). (See EqualOcean's analysis here) A promising but unexpected market As the competition gets fierce, companies should be more ambitious and eye more niche opportunities along the industry chain – not only to get hold of the current position, build up a more robust advantage moat, but also to diversify idiosyncratic risks. Chinese National Medical Products Administration (NMPA) announced on March 25 that paclitaxel for injection (Albumin Bound) provided by Celgene was banned from importing, sales and use in China. Celgene is a biotechnology company, delisted from Nasdaq on May 4 and merged to Bristol Myers Squibb (BMY:NYSE). Paclitaxel is a core ingredient that kills cancer cells and is widely used in oncological medicines. And the albumin-bound type is the most effective one with global recognition by the Food and Drug Administration (FDA) and the National Comprehensive Cancer Network (NCCN).  Before the ban, there was a triopoly – a situation in the domestic supply of paclitaxel: CSPC Pharmaceutical (1093:HKSE), Hengrui Medicine and BeiGene, who was in strategic cooperation with Celgene. It is very like to see a duopoly market in this cancer killer in a short time. The total market size of paclitaxel in 2019 is between 17 million and 18 million units. According to International Medicine Studies' data, the new centralized procurement has ordered an amount of 136,890 units of albumin-bound type. (100 milligrams per unit). For sure, Chinese pharmaceutical companies have a long way to go. A harsh attitude towards old stains is a must to embrace a more transparent, equal and clean industry environment. 

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May 10, 2020 11:33 pm ·

China’s Healthcare ETF: The Next Limelight

The continued pandemic has whirled around the globe, leaving economic slumps and a desire to find solutions and explanations – and apportion blame. Hesitation is rife over the outlook of the coming one or two years. However, while the western market is struggling with frozen growth, stagnant investment processes and a deteriorated market for small- and medium businesses, the Chinese market has gradually picked up its usual hustle-and-bustle. One of the most remarkable performances among all the Chinese industries since the outbreak last December is that of the healthcare industry. It outperformed not only other domestic industries boards and its Nasdaq- and NYSE-listed peers, but also protected many China Healthcare ETF holders from severe financial distress, similar to 2018. The first exchange-traded fund (ETF) was launched on January 23, 1993 and the last few years have witnessed their maturity in the US market. Praised for many merits, e.g., wide diversity, lower costs and tax efficiency, etc., ETFs have been deemed an ideal asset for individual investors and popular products for traders. Indeed, faced with this global ‘black swan’ issue, the ETF funds have proved their resilience in the suffering marketplace. China healthcare-focused ETFs and their underlying indexes The ETF market started late in China, partly because of strict market regulations, partly investors’ insufficient expertise. Even though the Chinese ETF market is quite underdeveloped compare to the western ones, Chinese companies are usually blended into some international ETFs. The tremendous domestic market, stable social environment and growing consumption capabilities, etc. – all these merits of the emerging market are winning the favor of global investors. The MSCI China Health Care Index was launched on January 1, 2001, to measure the equity performances of large- and mid-cap Chinese companies engaged in the health care sector. It covers securities listed in Mainland China, Hong Kong and the US (technically, Chinese healthcare companies across H shares, B shares, P chips, Red chips and A-shares since June 2018). Since April 30, 2020, this healthcare-specific index has been exposed to 79 companies, at a market cap of HKD 789.597 million, and has outperformed MSCI China since July 2018. Together with the general health care index, related MSCI China healthcare indexes are underpinning two ETFs, KURE and CHIH, with a focus on China’s healthcare sectors. Both, listed in NYSE Arca, are based on the same securities pool of Chinese-listed healthcare companies, but are very different on the constraints of their underlying indexes. KURE, registered on January 31, 2018, seeks to measure the performance of MSCI China All Shares Health Care 10/40 Index by picking out 80 out of 81 portfolio companies. Comparable to KURE, CHIH is another ETF with a similar fundamental index – MSCI China Health Care 10/50 Index, holding 35 out of 79 portfolio entities. MSCI is not the only institute that has realized the value of the healthcare sector in this emerging market. A half month after the launch of KURE in early 2018, Loncar Funds established the Loncar BioPharma Index (LCHINA: INDEXNYSEGIS), an index of 36 securities specializing in China’s biopharma industry, and six months later introduced the related ETF, CHNA on Nasdaq. Instead of full exposure to a wide range of X-shares, Loncar China BioPharma Index only screened from China-related biopharma companies that were Nasdaq-listed and Hong Kong Stock Exchange-listed, with over USD 200 million market capitalization, as explained in the prospectus. The reconstitution is arranged every second Monday in February and August to weighted constituents by their market capitalization equally. Most promising healthcare segments in China The year of 2018 witnessed all these ETFs going public, a milestone when these Chinese healthcare companies gained more extensive exposure to overseas investors. Indeed, the growing aging population, accelerated urbanization and income growth and ever-open healthcare reform policies all convey very positive messages about the potential of this country’s healthcare future. But, faced with the broad sector, which is on track to be a good one, is investment simply a matter of common sense? Even though MSCI breaks the whole brick into fine segments, the ETF constituents vary a lot. KURE, the ETF backed by MSCI China Health Care 10/40, categorizes the Chinese healthcare ecosystem into six perspectives: patent and generic pharmaceuticals, medical equipment production, hospital administration, biotechnology, TCM (traditional Chinese medicines) and healthcare IT. In its portfolio, most weighted constituents are from pharmaceutical and biotechnology, representing 33.59% of the total fund as of March 31, 2020. Its comparable ETF, CHIH, has a slightly different matrix – it doesn’t segregate TCM solely but merges into pharmaceuticals, and especially adds a vertical named ‘life sciences tools & services.’ Among its top ten index constituents, it shared a similar structure with KURE of three pharmaceuticals, four biotechnologies, one medical device and one healthcare service IT, as of March 31, 2020. MSCI-backed ETFs are all trying to make the best out of high return and diversified risk. On the contrary, CHNA is a unique fund with a unique preference of the biopharma business in China. Eyeing the long-term prospectus of this field as early as February 2018, Loncar China BioPharma Index adopted a different screening mechanism to keep risks in control, with investable portfolio companies only listed in Nasdaq and HKSE and hurdle market cap of USD 200 million. The single-basket portfolio violates the universal diversification rule. But with a detailed look into this strategy, many biopharma names have a robust foundation, such as R&D spending, or innovative medicine in the pipelines,  to boost massive values soon. From pharmaceutical to biopharma The pharmaceutical segment is the most substantial portion among all these indexes and ETFs. In contrast with the top ten constituents of KURE, CHIH and CHNA, there is a wide overlap of constituent companies. Wuxi Biologics (Cayman) (2269: HKSE), WuXi AppTex Co (2359: HKSE) and Sinopharma Group (1177: HKSE) – three biopharmaceuticals – are all heavily weighted in these ETFs. When it comes to the typical pharmaceutical area without cutting-edge biotechnology, the two MSCI-generic ETFs have three additional overlapping companies, Jiangsu Hengrui Medicine (600276: SH), CSPC Pharmaceutical Group (1093: HKSE) and Alibaba Health Information (241: HKSE).  Biopharmaceutical products are explained as any pharmaceutical drug product manufactured in, extracted from, or semi-synthesized from biological sources. So, biotechnology allows a typical drug maker to be tagged as ‘high-tech’ together with a good reputation. Another commonly acknowledged fact about all biopharma players is that it takes a long time to monetize all those R&D investments – some listed companies haven’t benefited yet. However, for investors well-acquainted with the biopharma field, the real valuable assets are the R&D capability of innovative drugs to deal with rare critical diseases. In CHNA’s portfolios, eight out of the top ten most weighted companies are biotech pharmaceuticals, with CanSino Biologics (6185: HKSE) at 5.58% the most held. I-Mab (IMAB:Nasdaq), a biotech that just went to IPO this early January, is still expecting its first revenue fruit on the way. The Chinese healthcare industry, a large topic that came into the world’s sight last 2018, has been reported on over and over again amid the continued COVID-19 outbreak. After the large-scale domestic lockdowns, the economy has gained vitality via telehealthcare and now is moving on to its putative new normal. It seems that, as the way the investment world perceives the economy of China grows more divergent, one group remains trapped in a haze of prejudice while some minorities are trying to understand potentially healthy  – and health-giving – areas, with an open mind.

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Apr 16, 2020 09:37 am ·

First Come, First Cured: Chinese Drugmakers Race for COVID-19 Solutions

As the pandemic further ravages this world, global medical researchers and developers are trying to save people from fear and pain. According to the WHO (World Health Organization), three candidate vaccines are already being tested on humans, with the other 67 candidates at the pre-clinical stage. Among the three quick actors, China’s CanSino Bio has moved along the furthest, into Phase II, followed by Inovio Pharmaceuticals and Moderna at Phase I.  CanSino Biologics announced on April 9 the initiation of a Phase II clinical trial on human bodies in a joint effort with the Academy of Military Medical Sciences. It claimed to have obtained periodic achievements in Phase I clinical trial for the Recombinant Novel Coronavirus Disease Vaccine (Adenovirus Type 5 Vector, or the ‘Ad5-nCoV’), in a joint effort with Academy of Military Medical Sciences.  The Phase I trial started from March 16 and gave preliminary safety data based on 108 samples aged between 18 and 60. The second study is designed for a more profound objective, to evaluate the immunogenicity for Adenovirus Vector in healthy adults over 18, and on a larger sample group of 500 people. As disclosed on ChiCTR (Chinese Clinical Trial Registry), blood and urine are collected at Phase II, instead of serum and PBMC (Peripheral Blood Mononuclear Cell) at Phase I. Future test participants will be recruited in a randomized and blinded method for experimental vaccines.  Like it or not, most vaccines take more than a few months to reach the public’s hands, or between five years and 15 years to go perfect. As stated by Anthony Fauci, the director of the National Institute of Allergy and Infectious Disease in the US expects, a vaccine takes 18 months to go public. As shown on the WHO, the pre-licensure studies assess three mandatory clinical trial phases before the vaccine introduction and monitor acute undesirable reactions with over one in 10,000 vaccines. More Chinese names on the WHO list Financially supported by the Ministry of Science and Technology, the biotechnology CanSino Bio will conduct this ‘randomized, double-blinded, placebo-controlled’ clinical trial in three hospitals in Wuhan, the epicenter.  The Tianjin-based generic manufacturer previously developed the first-ever Asian vaccine against the Ebola virus early in 2014  (Ad5-EBOV)  and was approved for national stockpile and emergency use in 2017. Since being listed on the Hong Kong public market in March in 2019, the company has been eyeing another IPO in China’s Star Market this year, seeking a sufficient bankroll for scaling up vaccine research and production.   The WHO’s approved candidate list mentions that other Chinese biotechnologies are also running in the race of developing vaccines, while most are at the pre-clinical stage.  Fosun Pharma (2196: HKSE), in collaboration with BioNTech and Pfizer, is working on the vaccine based on micro RNA at the pre-clinical stage. Innovax (2680: HKSE), together with Xiamen University and GSK, is researching a vaccine in the type of truncated S (spike) proteins. Beijing CC-Pharming and iBio, Inc (IBIO: NYSE) are working together on the subunit protein-based vaccine by leveraging CC-Pharming’s 25 R&D experience in Middle East Respiratory Syndrome (MERS-CoV) and iBio’s FastPharming System  for fast plant-based biopharmaceutical production. Sinovac Biotech (SVA: Nasdaq), known as the first company with approved SARS vaccine trials on humans back in 2004, headed into this meaningful project immediately. It is also the only Chinese company seeking an inactivated vaccine solution. What is behind these names is the ever-expanding vaccine market in China. The vaccine market size is projected to grow at a compound annual growth rate of 11.88% going forward. Private vaccine business expects to serve as the primary market driving force, considering that two vaccine-related scandals in 2016 and 2018 have left confidence stains on the public vaccine system. Drugs for current unmet needs The vaccine is about precaution strategy – how to prevent diseases for the non-infected people, while therapeutic drugs are for infected patients. Unfortunately, there is no special treatment for this deadly pathogen yet. WHO initiated an international clinical trial called ‘Solidarity’ to test and find an effective solution. This global initiative, involving over 90 countries, provides four options: Remdesivir; Lopinavir/Ritonavir; Lopinavir/Ritonavir with Interferon beta-1a; and Chloroquine or Hydroxychloroquine. As reported, these drugs have been tested in many Wuhan-based hospitals since the outbreak. Although it is still too early to talk about a specific drug for COVID-19, a treatment for the pathogen-associated complication is within sight. Empirical research into severe COVID-19 cases points out that the cytokine release syndrome (CRS) is one of the major reasons for the fatality of the new coronavirus. University College London’s article in the Lancet also mentioned the positive correlation between the severity of the cases and the occurrence of the cytokine storm. There is a nearly 20% chance that the attacked immune system overwhelmingly fights against the virus in a ‘suicidal’ manner, resulting in an overall systematic dysfunction.  I-Mab Biopharma (IMAB: Nasdaq), a Chinese biotech company, is currently focusing on developing medical solutions to contain this immuno-overreaction. Understanding the unmet needs for treating CRS on the anti-epidemic frontline, the team initiated studies into TJM2, an antibody to prevent overreaction of the immune cells and stem further circulatory collapse and organic degeneration. This Shanghai-based firm just went to list on the Nasdaq stock exchange this January. From 2016, the young biotech has exclusively studied innovative drugs for oncological and autoimmune disorders. Though no drug has been introduced to the market yet, it has won the favor of long-term investors by its dedication in drug innovation, indicated by 12 promising pipelines and CNY 426 million R&D expenses in 2018, or 86.5% of total expenses. Undoubtedly, there is a robust correlation between R&D expenses and the value of a tech-driven company. China’s Star Market sets 15% as the alert benchmark for evaluating candidate companies’ IPO status quo. The total pharmaceutical R&D spending by Chinese companies is projected to outnumber that of US peers in 2023, reaching USD 50 billion. Reaping the reward of the policy reform and early investment It is notorious that in old days a new drug could take decades to complete the approval process, leaving a lag of between six and eight years compared to other countries. Since 2015, the China Food and Drug Administration (CFDA) has issued several policies to facilitate the drug innovation, proposing a fast-track approval procedure for clinical trials. A direct result is that the new drug approval process in 2018 is shortened to a little over three years, compared to the average 12 years in the US.   The year 2019 witnessed a more profound reform with laws on vaccine management and drug management. A total of 56 new drugs were approved last year by CFDA, outnumbering 48 newly licensed medicines in the US. Another driver is the increasing capital activities. There is a clear upward trend of investment in China’s healthcare industry, including both VC/PE investors and secondary market watchers. In 2018, the capital injection flowing into the China life-science industry reached a new high record of USD 17.3 billion in a total of 696 investment deals. Among all these targets, the drug business segment was the winner portfolio for VC institutions, representing 44% of the total investment amount, followed by the Internet healthcare segment of 29%. As for the public market in China’s healthcare industry, the year 2018 was also a milestone in terms of IPO activities. There is a Chinese saying that an old man lost his horse but eventually gained good fortune,   similar to a blessing in disguise. While there is no ending in sight for this turbulent global situation for now, with the extreme phase of the Chinese outbreak under control, it seems that first experience with the unknown virus has brought Chinese scientists precious time to study. If treatments or vaccines are rushed to market or testing without proper preparation however, they may still finish up the race as losers.

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Jul 28, 2020 10:53 am · VCbeat

Chinese Genetic-tech Gomics Closes Pre-Series A to Commerce

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Jul 28, 2020 10:45 am · VCbeat

Continuous Glucose Monitor Maker Infinovo Closes Series B

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Jul 21, 2020 05:56 pm · Beijing Business Today

Wider Health Insurance Coverage Benefits Online Healthcare Business

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